Macro Chapter 10 part 1

1.

1 point

In Table 10-1, if full employment occurs at $3,400 billion, then

the economy experiences an inflationary gap of $75 billion.

the economy experiences a recessionary gap of $150 billion.

the economy experiences an inflationary gap of $150 billion.

the economy experiences a recessionary gap of $75 billion.

2.

1 point

The main reason that firms adjust their output when the price level changes is that

All of the above are correct.

taxes cause a supply-side reaction.

their profit margins change.

increased risks lead to a change in output.

uncertainty causes a drop in output.

3.

1 point

If the MPC of an economy is .90 and the economy has a horizontal aggregate supply curve, then an increase in investment spending of $50 million will increase total income by

more than $500 million.

$500 million.

more than $50 million but less than $500 million.

$50 million.

4.

1 point

The aggregate supply curve will shift to the left if

energy prices fall

the capital stock of the economy increases

the money wage rate increases

technology and productivity increase in the economy

5.

1 point

Recessionary gap arises when

inventory stock falls

when the general price level increases

government spending increases

there is less spending than desired

6.

1 point

An increase in wages will cause the aggregate supply curve to

shift outward

become flatter

shift inward

become steeper

7.

1 point

If the prices of inputs changes, what will happen to the aggregate supply curve?

The curve will become flatter or steeper depending on whether the input prices rise or fall.

It does not move but the economy moves along the curve.

It depends on whether the input prices rise or fall.

It shifts inward or outward depending on whether the input prices rise or fall.

8.

1 point

An increase in the money wage rate will cause the aggregate supply curve to shift

outward, which means the quantity supplied at any price level decreases.

inward, which means the quantity supplied at any price level decreases.

inward, which means the quantity supplied at any price level increases.

outward, which means the quantity supplied at any price level increases

9.

1 point

In Figure 10-3, both graphs (a) and (b) indicate that the economy is experiencing a(n)

recessionary gap of RG

recessionary gap of RE

inflationary gap of RE

inflationary gap of RG

10.

1 point

A decrease in the price of resources will cause the aggregate supply curve to

shift outward

become steeper

shift inward

become flatter

11.

1 point

The federal government increases spending by $50 billion and the main effect is an increase in the price level. It must be true that the economy is operating on the

vertical portion of the aggregate demand curve

horizontal portion of the aggregate demand curve.

horizontal portion of the aggregate supply curve.

vertical portion of the aggregate supply curve.

12.

1 point

If the price level decreases, what will happen to the level of real GDP supplied?

Nothing

It will decrease at first and then increase

It will usually decrease

It will usually increase

13.

1 point

If resource prices are fixed and the selling price rises, then

profits will remain constant

both profits and output will decrease

profits will decrease

profits will increase

14.

1 point

As the slope of the aggregate supply curve increases, this indicates that

inflation will be less of a problem.

the economy is reducing employment.

the economy is getting close to potential GDP.

output is falling.

15.

1 point

The slope of the aggregate supply curve is

downward

perfectly horizontal

perfectly vertical

upward

16.

1 point

If aggregate quantity demanded exceeds aggregate quantity supplied, we can expect an unplanned

accumulation of inventories, causing firms to raise prices.

depletion of inventories, causing firms to raise prices.

accumulation of inventories, causing firms to lower prices.

depletion of inventories, causing firms to lower prices.

17.

1 point

The combination of high unemployment and high inflation is termed

stagflation

reflation

unflation

depression

18.

1 point

In Figure 10-2, which segment of the aggregate supply curve has the smallest multiplier effect?

DG

AB

CD

BC

19.

1 point

Table 10-1
Aggregate Quantity Aggregate Quantity
Demanded Supplied Price
(billions) (billions) Level
$3500 $2900 65
3400 3000 75
3350 3150 90
3250 3250 110
3100 3400 130

In Table 10-1, what is the equilibrium level of real output and the equilibrium price?

$3,250 real output and a price of 110

$3,100 real output and a price of 75

$3,350 real output and a price of 90

$3,400 real output and a price of 75

20.

1 point

What does inflation do to the value of the oversimplified multiplier?

Inflation increases the value of the multiplier above the value of the oversimplified formula.

Inflation decreases the value of the multiplier below the value of the oversimplified formula.

Inflation does not change the value of the multiplier.

Inflation increases the value of the multiplier unless the level of unemployment also rises.

21.

1 point

If scientific research produces a technological breakthrough in the production of computer memory, then

business costs will fall, profits will improve, and production will increase.

profits will increase, allowing businesses to cut back production.

business costs will increase, profits will fall, and production will decrease.

business costs will fall, but profits will also fall, and production will decrease.

22.

1 point

In Figure 10-3, we would expect the aggregate supply curve in graph (b) to eventually

shift to the left, eliminating the inflationary gap.

become steeper in the upper portion, eliminating the inflationary gap.

become flatter in the upper portion, eliminating the recessionary gap.

shift to the right, eliminating the recessionary gap.

23.

1 point

In Table 10-1, if full employment occurs at $3,100 billion, then

the economy experiences an inflationary gap of $150 billion.

the economy experiences a recessionary gap of $300 billion.

the economy experiences an inflationary gap of $300 billion.

the economy experiences a recessionary gap of $150 billion.

24.

1 point

A statement issued by the president's economic advisors stating that growth can continue without price increases indicates that they believe the relevant aggregate supply curve is

downward sloping

vertical

horizontal

upward sloping

25.

1 point

Economists generally assume that there is a short-run trade-off between

output and employment

inflation and employment

deflation and unemployment

inflation and unemployment

output and growth

26.

1 point

The aggregate supply curve normally

slopes downward and to the right due to higher resource prices

has a horizontal slope equal to zero

is very steep in the lower portion and flatter in the upper portion

slopes upward to the right due to short-run fixed costs of production

27.

1 point

The price of imported oil decreased in 2001. How did this affect the aggregate supply curve?

It became flatter

It became steeper

It shifted inward

It shifted outward

28.

1 point

The aggregate demand and aggregate supply curve intersect

above potential GDP

at potential GDP

at a point which may or may not be equal to potential GDP

below potential GDP

29.

1 point

If the price level rises, what will happen to aggregate supply?

Nothing

It will shift inward

It will get steeper

It will get flatter

It will shift outward

30.

1 point

The concept of aggregate supply refers to a

fixed number of output

schedule of production costs

schedule of output

list of products demanded